behavioral economics

In a famous psychological experiment, subjects are shown a basketball video, about a minute long, and are asked to count the number of passes made by the team wearing white. Thirty seconds into the video, a woman in a black gorilla suit enters stage right, walks to the middle of the screen, pounds her chest, and then exits stage left. How many of the viewers noticed the gorilla? It’s tempting to predict that all of them did. But in fact less than 50% of video-watchers report seeing the gorilla (Simons and Chabris 1999). How do such oversights happen? And can the experiment tell us something about development?

Last year, I was in Nairobi, Kenya, along with some of my colleagues from the World Development Report (WDR) 2015, Mind, Society, and Behavior. We were there to set up the data collection efforts for a four-country study. One of the goals of this study was to replicate results from lab experiments that suggested poverty is a context that shapes economic decision-making amongst households.

In a new paper published in the World Bank Working Paper Series: “Debiasing on a Roll: Changing Gambling Behavior through Experiential Learning” (WPS #7195, February 2015), my co-authors and I study how we can start using insights from the biology of the human mind to better understand and facilitate learning of key development concepts especially among illiterate populations in poor countries.

If you put a target in the toilet, men will miss less. That’s the intuition behind the proliferation of strategically placed fake flies in public urinals. While anyone who has had to clean up after a careless aimer might say, “It’s about time,” anyone who has studied behavioral economics might say, “It’s about games.”

Games are fun. We play them for hours on end, of our own free will, without pay, in return for a feeling of accomplishment or virtual badges or points or just the promise of seeing all the cards bounce across the screen at the end of Windows Solitaire.